TPI Index strengthens experts' viewpoint that off late there has been a significant increase in small-sized contracts as compared to big, mega deals. The trend indicates changing buyer preferences in the global service landscape.   

This is the time when most outsourcing providers are out with their Q3 results. Infosys, HCL, Accenture have all posted robust numbers in the last quarter. Interestingly, the last quarter was expected to be a tough phase for the outsourcing industry. Lots of changes were happening, most of these as an aftermath of the recessionary fears that hit the global economies last year. Enterprises were facing cost pressures, service providers had a tough time in keeping up with the rising expectations. Profit margins in such a situation where expected to shrink. But interestingly the numbers posted by many of the service providers tell a different story altogether.

TPI index further reaffirms that 2011, on the whole, was good for the industry. According to the index, the total contract value of IT outsourcing deals rose 3 percent to a total of $95B in 2011 as compared to the previous year. Not just on an yearly basis but over a long term period, it was a big leap for the industry. Figures reveal that a total of 870 deals were signed in 2011, that is an all time record for the industry.

On the whole, good numbers suggest that the year, though marked by tough macro economic situations, was good for the industry. There are other interesting facts that are highlighted. The preference for smaller contracts among buyers have gone up tremendously. Over 75 percent of the deals last year were of small size, that is contracts of $100M or less than that. Experts say that there is a visible shift in preference for small size deals as buyers no longer want to be tied in to long term commitments. Another reason behind this can be a best-of-breed concept that is being increasingly favored by enterprises. Rajesh Ranjan, Research Director, Everest Research, says that as no single service provider is capable of offering all services under one single roof, clients are looking for service providers that are best in each area. Small size deals can also indicate more number of smaller companies opting for outsourced services.

Experts also point out an opportunity for new service providers to grab deals. A large chunk of outsourcing deals are up for renewal, and enterprises that are unhappy with their current outsourcing relationships are very likely to look out for better partnerships.

Across the global outsourcing destinations, there is a visible shift towards newer locations, especially in the Europe and Middle East and Africa. The European outsourcing market jumped 27 percent to over $55B. Newer locations in these regions are capturing significant interest as enterprises in Europe and the United States are increasingly opting for nearshored services. Service providers are also expanding their operations in these regions to capture the early mover advantages.